Success and Failure of Loyalty Programmes Essay

Success and Failure of Loyalty Programmes - Essay Example This has led to a plethora of customer-focused programs created with the help of customer relationship management tools, to increase company profitability (Brown, 2000; Kalakota and Robinson, 1999; Peppers and Rogers, 1997). The motive behind loyalty programs is to establish customer loyalty by rewarding a certain frequency of repeat purchase by customers. As pointed by Uncles et al: â€Å"Loyalty programs are schemes offering delayed, accumulating economic benefits to consumers who buy the brand. Usually, this takes the form of points that can be exchanged for gifts, free product, or aspirational rewards such as air miles. Airline frequent-flier programs have been a prototype for many of the schemes†. However, there is no consensus on the definition of loyalty exhibited by consumers (Jacoby and Chestnut, 1978; Dick and Basu, 1994; Oliver, 1999). While some claim that satisfaction is an indicator of loyalty, others debate this point. Reichheld (1994) points out that despite be ing â€Å"satisfied† or â€Å"very satisfied† many customers still defect. In the UK, Ogilvy Loyalty Centre found out that 85 % of its automotive customers claimed to be satisfied but only 40 % made a repeat purchase, and 66 % of packaged goods customers who identified a favorite brand actually ended up buying â€Å"another brand† in the recent past. Gremler and Brown point out that Federal Express, Pizza Hut franchises, and Cadillac dealerships have been able to forecast the sales from loyal customers with more certainty.